NO. 50. AN ACT RELATING TO THE
ALLOCATION OF THE ASSETS OF THE STATE TEACHERS’ RETIREMENT SYSTEM OF VERMONT,
THE VERMONT STATE EMPLOYEES’ RETIREMENT SYSTEM, AND THE VERMONT MUNICIPAL
EMPLOYEES’ RETIREMENT SYSTEM.

(H.117)

It is hereby enacted by the General Assembly of the State of
Vermont:

Sec. 1. PURPOSE

It is the purpose of this act to:

(1)
Combine the assets of the State Teachers’ Retirement System of Vermont, the
Vermont State Employees’ Retirement System, and the Vermont Municipal
Employees’ Retirement System for the purpose of investment in a manner that is
more cost- and resource‑efficient and will improve the effectiveness of
the oversight and management of the three systems’ assets.

(2)
Maintain the actuarial, accounting, and asset allocation integrity of the three
systems.

(1)
“Asset allocation” means the apportionment of investment funds among
categories of assets, such as cash equivalents, stock, fixed income, and real
estate, as well as subcategories of assets, such as government, municipal, and
corporate bonds, and industry groupings of common stocks.

(2)
“Committee” means the Vermont pension investment committee.

§ 522. VERMONT PENSION INVESTMENT COMMITTEE

(a)
There is created the Vermont pension investment committee to be comprised of 17
members as follows:

(1)
the trustees of the board of the Vermont state employees’ retirement system;

(2)
the trustees of the board of the state teachers’ retirement system of Vermont;
and

(3)
the trustees of the board of the Vermont municipal employees’ retirement system.

(b)
The members of the Vermont pension investment committee shall elect a chair and
vice chair to serve for a term of two years. The position of chair shall
rotate so that the chair is a trustee of one of the boards for only two
consecutive years in a six year period. If any member serves on more than one
board, that member may only serve as chair for two consecutive years in a six
year period.

(c)
Nine members of the committee shall constitute a quorum which shall include at
least three trustees of the board of the Vermont state employees’ retirement
system, three trustees of the board of the state teachers’ retirement system of
Vermont, and two trustees of the board of the Vermont municipal employees’
retirement system. The attendance of the state treasurer may only be counted
toward the minimum attendance requirements of one of the three boards. Nine
concurring votes shall be necessary for a decision of the committee at any
meeting of the committee. The committee shall be attached to the office of the
state treasurer for administrative support.

§ 523. VERMONT
PENSION INVESTMENT COMMITTEE; DUTIES

(a)
The Vermont pension investment committee shall only be responsible, consistent
with a duly approved asset allocation, for the investment of the assets of the
state teachers’ retirement system of Vermont, the Vermont state employees’
retirement system, and the Vermont municipal employees’ retirement system
pursuant to section 472 of this title, section 1943 of Title 16, and section
5063 of Title 24. The state treasurer shall serve as the custodian of the
funds of all three retirement systems.

(b)
Prior to a revision of an existing asset allocation for a retirement system by
the committee, the committee shall deliver a report to the appropriate
retirement board explaining the revised asset allocation recommendation no
later than 30 days prior to the next board meeting. The proposed
revisions shall become effective upon adjournment of the board meeting unless
the board votes to reject the proposed changes at that meeting.

(c)
Members of the committee shall serve without compensation but shall be
reimbursed from the funds of the retirement systems for all necessary expenses
that they may incur through service on the committee.

(d)
The committee shall keep a record of all its proceedings which shall be open
for public inspection.

(e)
The committee may formulate policies and procedures deemed necessary and
appropriate to carry out its functions.

(f)
The attorney general shall serve as legal advisor to the committee.

Sec. 3. 3
V.S.A. § 455(a)(24) is added to read:

(24)
“Committee” shall mean the Vermont pension investment committee.

Sec. 4. 3 V.S.A. § 471(l) and (m) are amended to read:

(l)
The retirement boardcommittee shall designate from time to time
a depositary for the securities and evidences of indebtedness held in the
various funds of the system and may contract for the safekeeping of securities
and evidences of indebtedness within and without the state of Vermont in such
banks, trust companies, and safe-deposit facilities as it shall from
time to time determine. The necessary and incidental expenses of such
safekeeping and for service rendered, including advisory services in investment
matters, shall be paid from the operation expenses of the system as hereinafter
provided. Any agreement for the safekeeping of securities or evidences of
indebtedness shall provide for the access to such securities and evidences of
indebtedness, except securities loaned pursuant to a securities lending
agreement as authorized by subsection (m) of this section, at any time by the
custodian or any authorized agent of the state for audit or other purposes.

(m)
The retirement boardcommittee may authorize the loan of its
securities pursuant to securities lending agreements that provide for
collateral consisting of cash or securities issued or guaranteed by the United
States
government or its agencies equal to 100 percent or more of the market value of
the loaned securities. Cash collateral may be invested by the lending
institution in funds approved by the state treasurer. Approval of funds shall
be made in accordance with the standard of care established by the prudent
investor rule under chapter 147 of Title 9.

Sec. 5. 3 V.S.A. § 472 is amended to read:

§ 472. INVESTMENTS; INTEREST
RATE; DISBURSEMENTS

(a)
The members of the retirement boardVermont pension investment
committee established in chapter 17 of this title shall be the trustees of
the funds created by this subchapter, chapter 55 of Title 16, and chapter
125 of Title 24, and with respect to them may invest and reinvest the
funds, and hold, purchase, sell, assign, transfer, and dispose of the
securities and investments in which the funds have been invested and
reinvested. Investments shall be made in accordance with the standard of care
established by the prudent investor rule under chapter 147 of Title 9.

* * *

(d)
Except as otherwise herein provided, no trustee and no employee of the board or
member of the committee shall have any direct interest in the gains or
profits of any investment made by the boardcommittee; nor shall
any trustee or employee of the board or the committee, directly or
indirectly, for himself or herself or as an agent, in any manner use the
same except to make such current and necessary payments as are authorized by
the board or committee; nor shall any trustee or employee of the board or
the committee become an endorser or surety, or in any manner an obligor,
for the moneys loaned to or borrowed from the board. The boardtreasurer,
with the approval of the board and the committee, shall adopt by rule
standards of conduct for trustees, members of the committee, and
employees of the board and committee in order to maintain and promote
public confidence in the integrity of the board and committee. Such
rules shall prohibit trustees and employees from receiving or soliciting any
gift, including meals, alcoholic beverages, travel fare, room and board, or any
other thing of value, tangible or intangible, from any vendor or potential
vendor of investment services, management services, brokerage services, and
other services to the board or committee.

Sec.
6. 16 V.S.A. § 1942(o) and (q) are amended to read:

(o)
The boardVermont pension investment committee shall designate
from time to time a depository for the securities and evidences of indebtedness
held in the various funds of the system and may contract for the safe-keeping
of securities and evidences of indebtedness within and without the state of
Vermont in such banks, trust companies, and safe-deposit facilities as
it shall from time to time determine, and the necessary and incidental expenses
of such safe-keeping and for service rendered, including advisory services in
investment matters, shall be paid from the expense fund hereinafter provided.
Any agreement for the safe-keeping of securities or evidences of indebtedness,
except securities loaned pursuant to a securities lending agreement as
authorized by subsection (q) of this section, shall provide for the access to
such securities and evidences of indebtedness at any time by the custodian or
any authorized agent of the state for audit or other purposes.

(q)
The retirement boardVermont
pension investment committee may authorize the loan of its
securities pursuant to securities lending agreements that provide for
collateral consisting of cash or securities issued or guaranteed by the United
States
government or its agencies equal to 100 percent or more of the market value of
the loaned securities. Cash collateral may be invested by the lending
institution in funds approved by the state treasurer. Approval of funds shall
be made in accordance with the standard of care established by the prudent
investor rule under chapter 147 of Title 7Title 9.

Sec. 7.
16 V.S.A. § 1943 is amended to read:

§
1943. INVESTMENTS; INTEREST RATE; DISBURSEMENTS

(a)
The members of the retirement boardVermont pension investment
committee established in chapter 17 of Title 3 shall be the trustees of the
funds created by this subchapter, and with respect to them may invest and
reinvest the funds, and hold, purchase, sell, assign, transfer, and
dispose of the securities and investments in which the funds have been invested
and reinvested. Investments shall be made in accordance with the standard of
care established by the prudent investor rule under chapter 147 of Title 9.

* * *

(d)
Except as otherwise herein provided, no trustee and no employee of the board or
member of the Vermont pension investment committee shall have any direct
interest in the gains or profits of any investment made by the boardcommittee;
nor shall any trustee or employee of the board or committee, directly or
indirectly, for himself or herself or as an agent, in any manner use the
same except to make such current and necessary payments as are authorized by
the board or committee; nor shall any trustee or employee of the board or
committee become an endorser or surety, or in any manner an obligor, for
the moneys loaned to or borrowed from the board. The boardstate
treasurer, with the approval of the board and the committee, shall adopt by
rule standards of conduct for trustees and employees of the board in order to
maintain and promote public confidence in the integrity of the board. Such
rules shall prohibit trustees, members of the committee, and employees
from receiving or soliciting any gift, including meals, alcoholic beverages,
travel fare, room and board, or any other thing of value, tangible or
intangible, from any vendor or potential vendor of investment services,
management services, brokerage services, and other services to the board.

Sec.
8. 24 V.S.A. § 5062(m) and (o) are amended to read:

(m)
The retirement boardVermont pension investment committee shall
designate from time to time a depository for the securities and evidences of
indebtedness held in the various funds of the system and may contract for the
safekeeping of securities and evidences of indebtedness within and without the
state of Vermont in such banks, trust companies, and safe-deposit
facilities as it shall from time to time determine. The necessary and
incidental expenses of such safekeeping and for service rendered, including
advisory services in investment matters shall be paid from the operation
expenses of the system as hereinafter provided. Any agreement for the
safekeeping of securities or evidences of indebtedness shall provide for the
access to such securities and evidences of indebtedness, except securities
loaned pursuant to a securities lending agreement as authorized by subsection
(o) of this section, at any time by the custodian or any authorized agent of
the state for audit or other purposes.

(o)
The retirement boardVermont
pension investment committee may authorize the loan of its
securities pursuant to securities lending agreements that provide for
collateral consisting of cash or securities issued or guaranteed by the United
States
government or its agencies equal to 100 percent or more of the market value of
the loaned securities. Cash collateral may be invested by the lending
institution in funds approved by the state treasurer. Approval of funds shall
be made in accordance with the standard of care established by the prudent
investor rule under chapter 147 of Title 7Title 9.

Sec.
9. 24 V.S.A. § 5063 is amended to read:

§
5063. INVESTMENTS; INTEREST RATE; DISBURSEMENTS

(a)
The members of the retirement boardVermont pension investment
committee established in chapter 17 of Title 3 shall be the trustees of the
funds created by this subchapter, and with respect to them may invest and
reinvest the funds, and hold, purchase, sell, assign, transfer, and
dispose of the securities and investments in which the funds have been invested
and reinvested. Investments shall be made with judgment and care, under circumstances
then prevailing, which persons of prudence, discretion, and intelligence
exercise in the management of their own affairs, not for speculation, but for
investment, considering the probable safety of capital as well as the probable
income to be derived.

* * *

(e)
Except as otherwise herein provided, no trustee and no employee of the
retirement board or Vermont pension investment committee shall have any
direct interest in the gains or profits of any investment made by the boardcommittee, nor shall any trustee, member of the committee, or
employee of the board or committee, directly or indirectly, for himself or
herself or as an agent, in any manner use the same except to make such
current and necessary payments as are authorized by the board or committee;
nor shall any trustee or employee of the board or committee become an
endorser or surety, or in any manner an obligor, for monies loaned to or
borrowed from the board.

Sec. 10. REPORT

On or before January 15, 2008, the state treasurer
shall submit a report to the general assembly, prepared by a qualified
independent party and approved by the three retirement boards, which evaluates
the effectiveness of having the Vermont pension investment committee manage the
funds of the State Teachers' Retirement System of Vermont, the Vermont State
Employees' Retirement System, and the Vermont Municipal Employees' Retirement
System according to the provisions of this act, along with any recommendations
for revising statutes, rules, or policies. The independent party shall seek
input from the three retirement boards and other directly affected groups in
preparing the report.

Sec.
11. APPLICATION

(a)
The asset allocations of the State Teachers’ Retirement System of Vermont, the
Vermont State Employees’ Retirement System, and the Vermont Municipal
Employees’ Retirement System in effect upon passage of this act shall remain in
effect until revised by the Vermont pension investment committee pursuant to 3
V.S.A. § 523.

(b)
Rules adopted prior to the effective date of this act by the board of the State
Teachers’ Retirement System of Vermont, the board of the Vermont State
Employees’ Retirement System, and the board of the Vermont Municipal Employees’
Retirement System which relate to the standard of conduct for trustees and
employees of a board shall apply to members of the Vermont pension investment
committee and shall remain in effect unless or until subsequent amendment by
the state treasurer with the approval of the retirement boards and the Vermont
pension investment committee.